Many universities, including Harvard University (above), have been strained by the “breadth and depth of the present downturn,” said Harvard’s president. (Lisa Poole/The Canadian Press) Click here to see full sized version.

Due to the ecomomic downturn, law schools across Canada are set to be hit by a triple whammy: souring investments, dwindling donor prospects and shrinking government funding.

Universities across the country are feeling the pinch. Some the Canada’s most prominent and prestigious post-secondary education institutions — including the University of Toronto, University of British Columbia and University of Waterloo — have admitted their endowments have shrunk due to market volatility these days.

Law schools know, they too, will be hit where it hurts over the coming months (and possibly years.)
“A number of law schools rely heavily on endowments, or revenues that come from endowments, to supplement their basic operating budgets. Where those endowments have been hit hard by recent developments, a law school may see important revenue streams to the law school diminished,” said Brent Cotter, dean of the college of law at the University of Saskatchewan in Saskatoon.

In many cases, endowments touch numerous aspects of law school operations.

“We have endowments that help to support scholarships and bursaries, library acquisitions, faculty research, guest lectures and some student activities,” noted Philip Bryden, dean of law at the University of New Brunswick in Fredericton.

“At UNB,” he added, “we do not generally rely on endowments to support our basic operations, and we have some reserve funds that help to cushion the effects of temporary declines in the value of our investments. We have not felt the impact of these declines in the current academic year, but unless there is a significant turnaround in the next year, we will find it more difficult to do some of the things we would like to be able to do than has been the case for the past few years.”

At the University of Saskatchewan, there are also sunnier skies overhead.

“Considering our modest size, we do have significant endowments that support our operations. But we have benefited [from] quite prudent management of these resources by the university and are experiencing, at this point, only very minor, virtually insignificant, adverse impacts,” said Cotter. 

Certainly, if what is happening south of the Canada–U.S. border is any indication, there may be rough weather ahead.

“U.S. schools are already feeling the effects,” said Mayo Moran, dean of the faculty of law at the University of Toronto.

“They depend on the revenue from their endowments more so than in Canada.”

In the fall of 2008, U of T warned faculty and staff not to expect any money this year from the endowment funds, according to the Canadian Press. The funds were slated to generate $62 million in income this year. While U of T did not offer a specific dollar loss, it did admit it was hit hard by market losses due to global market turmoil.

Harvard University President Drew Faust recently told the Associated Press that, “We need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial restraint.”

Endowments are only one area in which the global credit crisis may affect Canadian law schools. Another area: Donations.

“For those law schools who are seeking to attract major donations to their law schools — for capital projects, new endowments, student scholarships and financial aid, for example — it is likely that the donor community, also being adversely affected by the deteriorating financial markets, will not be as willing or able to support these projects,” Cotter said. “This could easily delay very good initiatives presently being planned or launched by law schools around the country.”

Contributions, of sort, from another source are also likely to dry up.

“It is quite possible that the ways in which government resources are constricted by the economic downturn (reduced revenues, reduced budgets, reduced transfers to universities) will adversely affect law schools’ budgets in coming years,” noted Cotter. 

“The vast amount of money is spent on people,” said Moran. “People are the budget. If this (downturn) persisted we’d have to become more cautious in hiring new faculty, but that would be quite a way out.”

Many law schools are well insulated — for the time being.

“For a number of reasons, primarily increased tuition and the generosity of our donors, our resources have expanded quite a bit in the last five years,” said Bryden. “As a faculty, we have been reasonably careful in our budgeting, and we have not overextended ourselves in terms of ongoing financial commitments.

“We will probably have to continue that approach for the next few years,” he added, “and I expect that it will be much more difficult than it has been in recent years for us to move forward on a number of fronts simultaneously.”

Increased enrollment may help offset some unpleasant financial forecasts. When the going gets tough, noted Moran, people “credentialize.”

A strong national, and provincial, economy may also lead to fairer weather for at least some law schools in this country.

“It is naive to think we are insulated from the world’s financial woes, but our prospects for weathering it are perhaps the best in Canada,” said Cotter. 

Those prospects could be bolstered by the government, if it increases spending rather than slashing budgets.

“Government recognizes spending on education is important at a time like this,” said Moran.
The economic upheaval also presents opportunities for law schools.

“I believe that even in a difficult economy law schools will have opportunities to enrich the educational experience available to our students and to pursue significant research. They may not be exactly the same opportunities that would be available in more prosperous times, but I think you have to be prepared to adapt to circumstances you cannot control,” Bryden said.

Indeed, noted Cotter, there is an academic element inherent in weathering the current economic climate.

“There is a critical need to explore the relationship between law and the circumstances that caused or ‘allowed’ the situation we have seen in the last few months to develop in the first place.”

While the current economic forecast is dire, it can’t last forever.

“We’re all in a period of great uncertainty,” said Moran. But she stressed, “We’ll come out of it.”